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Select & Ultimate Rates: Many insurers file two (2) different sets of rates with the State Departments of Insurance for each and every risk class. Select Rates are filed for use in newly-issued policies where health examinations and medical records provide underwriters with the information needed to "select" the rates most appropriate for a given applicant (e.g., super-preferred, preferred, standard, sub-standard rates). Ultimate Rates are filed for use in the renewal of existing policies where this underwriting information is aged or not available. Ultimate Rates are, therefore, higher than Select Rates to compensate the insurer for the risk that a health condition (e.g., heart attack, cancer, etc.) can develop after policy issuance. Select Rates apply in the initial policy year(s) with Ultimate Rates phased in as underwriting information ages (typically over the first 10 - 15 policy years). Policies that have reached the Ultimate Rate period (e.g., policies 10 years old and older) may be "re-rated" by supplying a new health examination and updated medical records thereby "refreshing" the underwriting information needed to "select" the appropriate rate class.

Separate Accounts: Insurance company assets that support only cash values of specific policy forms and are completely separated from the general account investments that back the rest of the company’s products. Separate accounts are typically used for variable products, which pass actual investment experience including all capital gains and losses through to policy cash values. [Also see general account.]

7-Pay Premium: The Technical and Miscellaneous Revenue Act (TAMRA) of 1988 classifies certain policies where premium payments exceed a certain threshold as Modified Endowment Contracts (MECs). Distributions from these policies (excluding death benefits but including policy loans and withdrawals) are taxed differently (i.e., both withdrawals and loans are generally taxed under LIFO accounting rules where loans are treated as withdrawals and gains are taxed first and basis withdrawn last) and may be subject to an IRS 10% penalty tax. A policy is generally considered a MEC when cumulative premiums paid exceed the cumulative annual 7-pay premium. To the extent that cumulative premium payments are less than the cumulative annual 7-pay premium, then loans would generally not be taxable, withdrawals would be taxed under FIFO accounting rules (i.e., cost basis is distributed first and not taxable until gains are distributed which are then taxable), and neither are subject to an IRS 10% penalty tax.

Smoker: A health profile designation for policy buyers who have used tobacco products within the last two years. [Also see tobacco use.]